Until 1999, Icelandair operated transatlantic services out of Luxembourg via Keflavik to JFK and other destinations in the USA. I remember from the 1980s, when they still used DC-8's, that they were one of the cheapest possibilities to get to the USA, and even operated bus feeders from cities in Germany and France to LUX to attract more business.
Now my question: WHY exactly were thy able to undercut the transatlantic fares of LH, BA, AF etc?
I think it had to do with the fact that Luxembourg had no national carrier flying to the USA, so Icelandair could get traffic rights more easily. Second I think they were not IATA members so that they did not have to adhere to the fares agreed at the IATA passenger service conferences.
Thanks for anyone with some facts to confirm my thoughts or corrections.